What is a severance or separation agreement?

If you lose your job, your employer may offer you a severance package, and if you decide to accept it, you may be required to sign what’s called a severance agreement or a separation agreement. A severance or a separation agreement entitles you to certain pay or compensation to make up with the fact that you’ve just lost your job. However, employers don’t offer severance packages merely to be nice, so you may have to make sure that you understand the terms of the separation or severance agreement, because oftentimes it will require you to give up certain rights, such as the right to sue your employer.